Obamacare Roils New Overtime Pay Rules

President Barack Obama announced new rules that will require businesses to pay more in overtime wages, in a push to protect middle class pay and the 40-hour work week. But the president’s health reform law’s “perverse incentives” have helped undercut middle class pay and the 40-hour work week, three of the nation’s biggest labor unions have said. The union leaders, including the Teamsters, sent a withering letter in July 2013 to Democratic leaders Harry Reid and Nancy Pelosi, warning that President Obama’s health reform law will “destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”

These same unions, who said they helped campaign to get Democrats elected, noted the health reform “law creates an incentive for employers to keep employees’ work hours below 30 hours a week. Numerous employers have begun to cut workers’ hours to avoid this obligation, and many of them are doing so openly. The impact is two-fold: fewer hours means less pay while also losing our current health benefits.”

The union leaders added that the Affordable Care Act will “destroy the very health and wellbeing of our members along with millions of other hardworking Americans.” (For the full text of their letter, see bottom).

The new regulation for overtime pay is set to come from the Department of Labor, potentially taking effect in 2016. It would affect an estimated five million salaried workers who earn less than $970 per week, or $50,440 per year. It would make them automatically eligible for overtime pay if they work more than 40 hours a week. Presently, the cutoff is around $455 a week, or $23,660 per year.

"Right now, too many Americans are working long days for less pay than they deserve," President Obama wrote in an op-ed for The Huffington Post, adding, "In this country, a hard day's work deserves a fair day's pay. That's at the heart of what it means to be middle class in America."  The federal government has increased overtime pay eight times in 75 years, but only once since 1975. It is not indexed to inflation.

However, what you won’t see in the president’s letter is how health reform eroded the 40-hour workweek – what elected officials have called the "linchpin of the middle class."

Specifically, the law gave employers an incentive to cut workers' hours to avoid paying fines owed under the health reform law. The law requires employers with at least 50 full-time-equivalent workers to offer health insurance to employees who work 30 or more hours a week or pay a penalty.

Business leaders and union heads have said this seemingly arbitrary cut off has pushed companies to reduce their workers’ hours to less than 30 hours a week, as well as replace full-time jobs with part-time employment, cutting into worker earnings.

Businesses have lobbied to return to a 40-hour work week, sending letters to Congress. The“More Time for Full Time Coalition” is comprised of businesses partners that include the National Association of Convenience Stores, the American Hotel and Lodging Association, the American Rental Association and the National Association of Theater Owners. Legislation to waive fees on companies that don’t offer coverage to employees working fewer than 40-hours a week failed in Congress this year.

Here’s the unions’ full letter below: